Sky/Virgin Media Spat Intensifies

LONDON, February 23: Virgin Media subscribers could lose
access to a slate of Sky channels at the end of this month, after talks between
the cable platform and BSkyB broke down over carriage terms.

Virgin Media and BSkyB have been unable to come to an
agreement on carriage for Sky One, Sky Two, Sky Three, Sky News and Sky Sports
News. Virgin Media said it is expecting Sky to pull the channels when the
current contract expires next week. The cable platform also said in a statement
that the “nature of these negotiations” over the past few days had led it to
believe that “this outcome has been deliberately engineered by Sky in order to
suppress competition and coerce Virgin Media's customers into switching to its
service by denying them access to the basic channels.”

The Virgin Media statement continued: “This view is
reinforced by Sky's decision to broadcast, at the height of negotiations on
February 12, a series of promotions claiming that the channels were about to
disappear from Virgin Media's network. This was nothing more than a
heavy-handed attempt to exert undue influence on the negotiating process.”

Virgin Media claims that although Sky’s basic channels have
been slipping in popularity in its subscribers’ homes, the company “has
consistently demanded a carriage fee more than double the existing arrangement.”

The cable platform says that it has “responded with a series
of offers,” to renew carriage of the channels. “Sky, however, continues to
demand a price that bears no relation to the channels' popularity and is
radically out of line with the way it values competitors' channels on its own
network.”

Should Virgin Media lose the Sky offerings, including Sky
One, home to hit shows like Lost and 24, it could find some of its subscribers defecting to
BSkyB.

“It remains Virgin Media's position that negotiations are
ongoing and we continue to seek an agreement on terms that make commercial
sense for both parties,” the cable company said. “However, as things stand,
Sky's demands offer no prospect of us being able to reach a commercially viable
agreement to continue carriage of these channels on Virgin Media's platform. If
Sky withdraws its channels, Virgin Media will divert any money saved into
continuing the transformation of our TV service with an extensive range of new
channels and programming. This will include further additions to our existing
on-demand library and ensure our TV service more than matches anything on offer
from Sky.”

Virgin Media also noted that for Sky, the withdrawal would
mean a £45 million fall in its ad revenues, beyond the subscription fees they
will forego.

Commenting on the anticipated withdrawal of Sky's basic
channels, Steve Burch, the president and CEO of Virgin Media, said:
"Throughout its history, Virgin has challenged the attempts of dominant
corporations to manipulate markets, stifle competition and dictate consumer
choice. It has done so simply by giving consumers a better deal and Virgin
Media is going to do the same. Sky's behavior is a heavy-handed and
anti-competitive response to that challenge and consumer choice has been
reduced as a result. I'm pleased, however, that at a time when they're taking
content away, Virgin Media is giving people more."